The price of Bitcoin fell below $60,000 as markets braced for the Federal Reserve’s anticipated interest rate cut, the first in over four years.
The cryptocurrency’s price briefly dipped to $59,000 on Wednesday morning before showing signs of recovery. At the time of writing, Bitcoin is trading slightly below $60,000, marking a rebound from last week’s low of $54,000.
The dip comes as market participants speculate about the magnitude of the Federal Reserve’s upcoming rate cut.
“The consensus, based on various analyses and market sentiments, leans towards a 25-basis point cut at the upcoming Federal Open Market Committee (FOMC) meeting,” said Brian Dixon, CEO of OTC Capital.
However, uncertainty persists, with some discussions indicating the possibility of a 50-basis point cut due to weaker-than-expected economic data.
Last Friday, the US Labor Department released a jobs report showing only 142,000 jobs created in August, falling short of the forecasted 160,000 positions. This weaker economic performance has fueled expectations that the Federal Reserve will move to slash interest rates to stimulate growth. A rate cut could lead to a weaker US dollar, making riskier assets like Bitcoin more attractive to investors.
Despite recent volatility, some analysts remain optimistic about Bitcoin’s longer-term prospects.
“Bitcoin recently dipped below $59,000 but is showing signs of recovery… Some analysts predict it could aim for $90,000 by the year’s end, driven by the market’s anticipation of a dovish monetary policy,” Dixon noted.
Bitcoin’s recent performance is also correlated with movements in the broader financial markets. On Thursday, Bitcoin rose as much as 3.9%, briefly hitting $61,980, following an outsized 50-basis point cut from the Federal Reserve. This move pushed US equity futures and Asian stocks higher, signaling increased investor confidence in riskier assets like cryptocurrencies.
“The market needed a few hours to see the big picture and start reflecting the improved outlook,” said Caroline Mauron, co-founder of Orbit Markets, a liquidity provider for digital-asset derivatives.
The Fed’s decision is seen as positive for risk assets, but Chair Jerome Powell cautioned that future rate cuts would depend on incoming economic data, which tempered the market reaction in US trading hours.
With input from Bloomberg and the Street.
